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(Wikipedia)

Companies around the globe are learning that while cloud computing has many virtues, perhaps chief among them is its ability to help business leaders shift huge chunks of IT budgets away from low-value infrastructure and toward customer-facing growth and innovation.

It’s easy to lose sight of that profound outcome and to get caught up instead in the arcana of cloud-computing technologies and architectures, because at the enterprise level the cloud industry is still quite young, still developing in fits and starts, and still defining its boundaries.

And while the creative destruction triggered by the cloud is certainly shaking things up on the tech side, the disruption and upheaval will be even more widespread in the new levels of financial freedom and flexibility that the cloud will give to companies that use it wisely.

This revolution is occurring on two fronts: within the tech industry itself, as IT companies large and small look to redefine themselves around the cloud; and among the businesses that are rapidly turning to cloud solutions to help them optimize where and how they spend their IT budgets.

“By going private, Dell can focus on its enterprise transformation instead of explaining every three months why it hasn't built a better iPad,” says the article in InfoWorld.

Microsoft continues to push more and more of its business into the cloud, and its recent TV ads certainly added to the consumer-level buzz about (if not richer understanding of) cloud computing.

After pioneering online sales of books and music, Amazon has become a significant player in offering cloud storage and computing services.

Phone companies, tech companies, music companies, movie companies, and others are all rushing to capitalize on the cloud phenomenon, now inextricably linked to today’s highly mobile and social lifestyles and workstyles.

Inside the tech industry, companies eager to tap into all that excitement and potential revenue and brand-building are tripping over each other to position themselves as not just cloud providers but as real cloud providers, official cloud providers, the one-and-only-true cloud provider, and even as Wikipedia-approved cloud providers.

And I think they’re missing the point. Badly.

And probably disastrously.

Because whatever boundaries exist today for the cloud, we can be sure that those boundaries will be redrawn, reframed, redefined, and recast to match the relentless expansion of this technological inflection point that’s not only remaking the tech industry but the ways in which businesses view the potential of IT and the way they should invest in it.

That’s the central issue: what customers are doing with cloud solutions, how they’re able to free up more funding for growth and innovation, and how they’re able to adapt more rapidly and effectively to life in our customer-driven world.

We’ll begin to see the real the real creative-destruction power of the cloud unleashed when we begin to define the cloud in terms of what business customers want and need, and when we stop diddling around with inside-baseball constructs that mean little or nothing to the businesspeople who are ready to spend many tens of billions of dollars on cloud solutions that focus on and deliver business value.

Imagine if a 3-year business-transformation plan forged through some bold collaboration between the CFO the CIO used cloud computing to enable a big corporation to liberate $100 million in IT spending to fund growth-oriented and customer-facing innovation.

Instead of spending, year after year, 78% of the IT budget on low-value infrastructure, the CFO-CIO cloud plan would see that ratio move from its current level of 78% for keeping the lights on and 22% for innovation, to 74%/26% after one year; 70%/30% after two years; and 65%/35% after three years.

That liberation happens when companies turn to the cloud to reduce overdependence on big up-front capital investments and overall IT spending, and are thereby able to invest more in initiatives such as Customer Experience (CX) rather than another round of infrastructure sprawl whose value is increasingly hard to pin down.

That’s the real magic of the cloud: it lets businesses rethink where and how they deploy their precious IT dollars, and allows those businesses to focus more of their IT budgets on projects that truly matter.

1) Simplify IT and Transform Your Spending: Kick the 80/20 Budget Habit. While surely not as sexy as Social and Business Analytics and Cloud, this bold decision to take an entirely new approach to IT infrastructure is the one and only way CIOs can unlock the funding necessary to pursue those snazzier and unquestionably vital new initiatives. Far too many companies today find that they need to devote 70% or even 80% of their IT budget just to run and maintain what they’ve already got, leaving as little as 20% for innovation. And if you wonder sometimes why you’ve got precious little IT budget available to fund growth-oriented innovation, the answer becomes pretty clear by looking at the list of usual suspects that have brought us to this point: server sprawl, massively underutilized storage resources, unproductive data centers, labor-intensive integration requirements, and a near-endless list of “strategic” vendors. The IT policies of the past that resulted in the 80/20 trap are simply no longer able to meet the needs of today’s intensely demanding and always-on business world, and are indeed becoming liabilities not just because they’re inadequate but also because they suck up vast percentages of the IT budget and make it almost impossible for CIOs to fund essential new efforts in analytics or cloud or mobile or social. CIOs need to determine which vendors are only exacerbating this problem, and which ones offer modern alternatives that are cheaper, faster, and smarter. My POV: CEOs should tie most or all of the variable compensation for their CIOs to changing that deadly 80/20 budget ratio by 5 percentage points per year. The CIOs willing to tackle this huge issue will not only earn some nice bonus dollars but will unlock huge value for their companies as well as for their own careers. [END OF EXCERPT]

So we’re currently seeing the creative-destruction power of the cloud manifest itself within the tech business as every type of IT vendor—hardware companies, software companies, networking companies, integrators, etc.—tries to become an aggressive cloud player.

But the truly creative and destructive forces of the cloud are also beginning to take hold on the customer side in the form of fresh thinking about what IT should be and what it can achieve, new products and services and business models made possible by and those freed-up IT dollars, and new ideas unlocked by those innovative approaches.

Among tech companies, different strategies are emerging as some companies decide to be specialized niche players while a very small number of other tech vendors choose to play at one or more levels of the 3-tier cloud stack: applications (SaaS), platforms (PaaS), and infrastructure (IaaS).

At Oracle, the strategy is to be offer solutions at all levels of the cloud stack, optimized to work together seamlessly in private clouds, public clouds, or hybrid combinations. Here’s how CEO Larry Ellison described the Oracle approach in an interview a few months ago with CNBC’s Maria Bartiromo, who asked if niche cloud players will have an advantage:

“Well, there are a lot of niche companies,” Ellison said. “Salesforce is very good at applications in the cloud for sales automation, but we have a much more complete suite of applications in the cloud—we don’t just do sales automation or marketing automation—we also do accounting and financial management and Human Capital Management and Talent Management—all of those things.

“So we have a complete suite of applications in the cloud—that’s something a small company can’t do. That’s a lot of work,” Ellison said.

“Oracle participates in all three layers of the cloud, and that’s what customers want. When customers buy a cloud, they get applications; they get a platform—database and middleware, and Java; and they get the underlying infrastructure—the operating system, virtual machine, and the hardware.

“Oracle is the only company in the world that innovates at all three levels—develops, engineers, and invests—at all three layers of the cloud. So we think it’s very difficult for a niche provider to compete with us,” Ellison said.

Oracle’s clearly betting that its competitive advantage over niche players will grow as the creative-destruction power of cloud computing takes hold in more and more businesses across the globe, and gives them the chance to redefine what they spend on IT, how they spend on IT, and what business value they demand from IT.